What's Ahead for Exelixis?

Exelixis had reason to celebrate last week as its first drug Cometriq launched in the United States. But Cometriq's approval for the niche market of medullary thyroid cancer, or MTC, won't deliver blockbuster revenues, so the company continues to seek more profitable indications. A variety of mid-stage trials are also under way. But is now the time to buy Exelixis?

Let's look at what's in store now that Cometriq's out.

Label expansionExelixis rode investor confidence all the way to Cometriq's approval last November. Even the cancellation of the drug's planned FDA panel didn't dent share prices. The run-up eventually led to the post-approval drop of 7.1%. The company's up nearly 4% year-to-date as everyone waits to see what will happen with the drug in its small market.

How little is the MTC market? Exelixis has five sales reps in place for the drug's launch.

But Exelixis isn't resting on its laurels and has its eyes on adding more approved indications. The largest potential exists in its trials for metastatic castration-resistant prostate cancer, or mCRPC). One phase 3 trial under way will test Cometriq in patients resistant to Medivation's Xtandi and Johnson & Johnson's Zytiga. Another late-stage trial will try Cometriq when used with that same drug duo. Results should start reporting in 2014.

Exelixis predicts that approval in the prostate indication would open up a potentially billion-dollar market. But the prostate cancer field is crowded, and the drug might have trouble finding its footing.

The company plans to initiate pivotal trials this year for a form of kidney cancer called renal cell carcinoma, or RCC, and the liver cancer hepatocellular carcinoma, or HCC. Future trials may focus on other cancers, including breast and ovarian.

Maturing pipelineExelixis has a number of big pharma partnerships that inhabit the pipeline. The deals feature products developed in-house and then licensed out. As I've mentioned before, Exelixis doesn't have much financially at stake in these programs. The company just has to sit back and wait for milestone payments and potential future royalties.

Four early-stage projects stand out in this outsourced group.

GlaxoSmithKline has the breast cancer drug Foretinib that's currently involved in phase 1b/2 studies for different forms of the disease. Bristol-Myers Squibb has BMS-833923 in phase 1b, testing it in conjunction with Bristol's best-selling Sprycel for the rare condition chronic myeloid leukemia.

Exelixis licensed two cancer drugs to Sanofi . SAR245408 is undergoing trials for a wide variety of cancers. Projects include a phase 2 for endometrial cancer and a phase 1/2b for breast cancer.

SAR245409 has a phase 2 trial for non-Hodgkins lymphoma and as a combination therapy in phase 1b/2 for breast cancer.

But there's one partnership where Exelixis has more on the line: Roche subsidiary Genentech's melanoma treatment GDC-0973, which is currently in phase 3 as a combination therapy with the company's Zelboraf. Exelixis will receive a percentage of initial domestic sales while contributing to the marketing costs. That sales percentage decreases as sales increase. Exelixis can choose to co-promote the drug in the U.S.

FinancesIn the most recently reported quarter, Exelixis reported $321 million in cash and equivalents. The company had a cash burn of about $35 million that quarter.

The most pressing cost will be Cometriq's launch. But that won't break the bank because the sales staff and initial patient base are so small. Diplomat Specialty Pharmacy will serve as the drug's exclusive distributor.

Foolish final thoughtsExelixis' finances will carry Cometriq to market for MTC. But a prostate cancer indication for Cometriq would cement the drug's reputation while providing greater financial stability. The mid-stage pipeline has a decent population, but it will be some time before most of those drugs show enough data to evaluate. Shares ran up to the November FDA approval and have since stabilized. The next important catalyst will come next year when the prostate trials begin to report.

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Fool contributor Brandy Betz owns no shares of the companies mentioned. The Motley Fool recommends Exelixis. The Motley Fool owns shares of Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.